IRS Bank Levy
What is an IRS Bank Levy?
To levy literally means “to take”. An IRS bank levy is an order directing your bank to seize ALL funds in your account and send them to the IRS.
How does an IRS Bank Levy work?
When your bank receives a Notice of Levy from the IRS, they must take any money that is in your account at the moment they process the levy and set it aside in a special trust account. Any money that is deposited into your bank account after the levy has been processed will not be captured in the IRS bank levy, unless they issue another bank levy.
An IRS bank levy attaches to any account at that financial institution that you have an interest in. Primarily, this means if your Social Security Number is attached the account, then the IRS bank levy will attach to that account too. This includes join bank accounts with your spouse, bank accounts that are in the name of your children on which you have signing authority, savings accounts, investment accounts, and even safe deposit boxes. An IRS levy will attach to all of the money in these accounts and will be set aside in the trust account.
The money is held in that special trust account for 21 days. This 21 day period is in place to give you a chance to contest the bank levy and prove that it is either in error or will cause you an economic hardship. Unless the bank receives an order to Release the Levy before the end of that 21st day, they will forward the money that is in the trust account to the IRS the next day.
What other accounts or property is subject to IRS Tax Levy?
The IRS can levy any property that legally belongs to you that is currently in the hands of someone else. This includes bank accounts, investment accounts, and retirement accounts. The IRS can also seize property including vehicles, real estate, and business equipment though such seizures are much rarer than a bank account levy.
Can the IRS levy my Accounts Receivable?
Yes, once you invoice a customer that invoice is an asset that the IRS can seize your right to. By doing so, your customers will have to pay the IRS the amount of your invoices rather than paying you. There is no 21 day holding period for an accounts receivable levy -- your customers are required to send money to the IRS at the same time that they would have sent the money to you.
How can I prevent an IRS Bank Levy?
The best way to prevent an IRS bank levy is to be proactive. Typically the IRS knows that a bank levy is going to have a devastating effect on your family or your business. They understand that it is going to cause you a financial difficulty.
Most often the IRS will send an IRS bank levy because you have missed a deadline or you are ignoring your tax problem. More than anything, an IRS levy is meant to get your attention. The best way to ensure that you are not a victim of a bank levy is to show the IRS that you are serious about taking care of your tax problems and make progress towards a resolution.
In other words, if you can get any missing tax returns filed and give them a proposal for resolution of the debt (for example, a payment plan or an Offer in Compromise) then you should not fear a bank levy. There are also many ways that an experienced professional can ensure that you are legally protected from a bank levy while you work on getting into compliance, usually though filing appeals or making informal agreements with the IRS.
How can I get an IRS Bank Levy released?
Because you only have 21 days to get an IRS levy released it’s important to get help now. If the IRS has levied your bank account you are under active tax enforcement and the collection efforts will increase.
In all cases, we can ensure that no future levies will be issued by the IRS by demonstrating that we are working on the problem and presenting a timeline for the resolution of your account.
If you can prove that the levy that was already issued is going to cause you an economic hardship or was in error, the IRS has the authority to release that levy and many times will do so. Usually this means that you will need to prove to the IRS that the money they took is needed to pay your necessary living expenses. You can prove this by showing copies of delinquent bills, utility shut-off notices, etc.
You should be warned, though, that the IRS has become less willing to release bank account levies than they were in the past. The most common situation is for the IRS to agree to stop issuing new levies, but keep whatever money they already have. It does depend on how well you can document your economic hardship, though.
For more information visit How to Release an IRS Levy.
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